For millennia, money has told the story of human progress—an ever-evolving symbol of trust. From crude barter to glittering gold, from paper notes to plastic cards, and now, to digital code—our transactions have transformed alongside our civilisations. Picture a fisherman swapping his catch for a clay pot. Clunky, constrained, and painfully local. Then came shells, salt, and silver—tokens of trust with built-in value. Paper money, pioneered by the Chinese, took a bold leap: value no longer resided in the material but in collective belief, managed by a central power.
India, an emerging digital powerhouse, is on the cusp of its next monetary leap. The Reserve Bank of India’s (RBI) Central Bank Digital Currency (CBDC)—the Digital Rupee is far more than a digital equivalent of cash; it’s a fundamental re-envisioning of money’s purpose in a swiftly changing world.
UPI Vs. Digital Rupee: Same Destination, Different Tracks
UPI and the Digital Rupee aren’t rivals; they’re dance partners. Since its 2016 debut, the Unified Payments Interface (UPI) has revolutionised payments in India, clocking over 5.86 billion transactions in June 2022 alone and growing 160 per cent annually. Its magic lies in its ease: multiple bank accounts linked to a single app, P2P or merchant payments in seconds, all without charges. UPI is now as common in Indian villages as it is in metropolitan malls.
But UPI is not money—it is a vehicle to move money. The Digital Rupee, in contrast, is digital money itself. Issued directly by the RBI, the e₹ is sovereign tender, not reliant on bank accounts or private apps. Running on distributed ledger technology (DLT) like Hyperledger Fabric, it’s a tokenised currency that can be stored and transferred, ideal for areas where banks or networks don’t reach.
Security In The Age Of Surveillance
DLT gives the Digital Rupee its backbone—transactions are immutable, encrypted, and recorded on secure, tamper-proof ledgers. With the RBI in direct control, security standards can be enforced uniformly. That’s a key departure from UPI, where each bank and app provider implements its own protocols.
But centralisation brings its own risks. Every e-rupee transaction is potentially visible to the state. While the Personal Data Protection Act, 2023 mandates anonymised logs, India still lacks the nuanced privacy layers that China’s e-CNY uses, such as tiered anonymity for small payments. Trust must be built not just in the system’s strength, but in its restraint.
The potential for increased state surveillance through a fully traceable digital currency, particularly in the aftermath of extensive 2023 data protection debates, poses a significant risk to public trust. The e-rupee must not only be secure but also demonstrably respectful of individual privacy. A transparent privacy framework, outlining clear data minimisation principles, user control over data sharing, and robust independent oversight, is paramount to prevent the Digital Rupee from eroding trust and becoming perceived as a tool for mass surveillance.
Access For All: Inclusion Or Illusion?
Roughly 400 million Indians remain outside the formal banking system. For them, the Digital Rupee could be transformative. Unlike UPI, the e-rupee does not require a bank account. Government benefits, microloans, and remittances could flow faster, cheaper, and more securely.
It is also a tool to formalise the informal. India’s shadow economy, accounting for 20–25 per cent of gross domestic product (GDP), thrives on untraceable cash. The e-rupee brings traceability—10 million pilot transactions by mid-2024 already show that digital cash is more than an experiment. Yet, black money doesn’t just hide in suitcases—it travels through shell companies and offshore havens. The e-rupee can not plug those leaks alone. GST enforcement, FATF-compliant anti-money laundering (AML) norms, and fintech regulation must complement its rollout.
Learning From Global Experiences
UPI has already revolutionised daily transactions with its smooth user experience. This provides India a significant advantage, particularly when contrasted with other nations’ CBDC journeys. China’s e-CNY, for example, has seen state-backed adoption through subsidies, while Sweden’s e-krona prioritises privacy. Conversely, Nigeria’s eNaira highlights the pitfalls of mistrust and poor communication, underscoring the need for clear communication and trust.
The e-rupee fills crucial gaps UPI can not, offering solutions where the internet, banks, or apps are unavailable. Pilots integrating e-rupee into UPI apps, like PhonePe’s 500,000 transactions in 2024, demonstrate this powerful synergy, enabling digital payments from the Himalayan foothills to the Sundarbans.
However, the e-rupee’s centralised nature presents distinct challenges for merchant adoption. Unlike UPI’s organic growth fueled by ease and incentives, the Digital Rupee could face resistance if its acceptance feels mandated, raising fears of surveillance and tax scrutiny among small traders. Beyond perceived coercion, practical barriers like varying technological literacy, significant infrastructure upgrade costs for POS systems, and unreliable internet access in remote areas are critical hurdles.
The e-rupee’s journey to mass adoption also demands addressing technical scalability. The underlying Distributed Ledger Technology (DLT) must efficiently handle billions of daily transactions—a monumental challenge requiring continuous innovation. Furthermore, robust data privacy frameworks and clear legal norms are essential to instill public trust, especially considering the lingering scepticism from the 2016 demonetisation.
Success hinges on more than just technological prowess; it requires a meticulously planned, transparent communication strategy that directly addresses public anxieties and clearly demonstrates tangible benefits to the average citizen, rather than solely relying on the promise of efficiency. A comprehensive rollout must proactively tackle these practical hurdles through targeted training, accessible tech solutions, and incentives, ensuring adoption feels empowering, not coercive
Why The Digital Rupee Matters Now
For India, this is not just about keeping pace with global trends. It’s about bridging gaps. Over 30 per cent of Indians still lack access to formal financial services. Jan Dhan Yojana taught us that inclusion is not just opening accounts, but ensuring usage. CBDC wallets can replicate that success—if backed by awareness, incentives, and reliable infrastructure.
Moreover, the e-rupee reduces reliance on physical cash, lowering costs, improving traceability, and helping combat tax evasion. It also gives India a geopolitical lever: a digital currency infrastructure that could integrate with partner nations, reducing dependence on dollar-based settlements in the long run.
Tech, Trust And Teamwork
Technology is only as good as the trust it builds. The e-rupee’s programmability allows for smart contracts, automated subsidies, and fraud-proof recordkeeping. Biometric authentication and AI-based fraud detection can fortify security. Integration with NPCI’s open architecture, just as UPI did, can make the user journey seamless.
But building a digital currency is not just a tech exercise. It requires coordination between the RBI, ministries, banks, fintechs, and civil society. Digital India’s backbone—BharatNet, Aadhaar, JAM trinity—must be fully mobilised. Campaigns modelled on Jan Dhan must spread awareness, especially in non-digital-first communities.
The Digital Rupee is more than bytes and blockchain. It’s an idea of inclusion, of accountability, of progress. From barter to blockchain, India has always innovated when necessity met ambition. The e-rupee stands at that intersection.
Its promise is immense: a nation where every citizen, regardless of geography or income, has access to secure, sovereign money. Where subsidies are instant, fraud is deterred, and informal labourers are empowered. But this future is not automatic. It demands trust in technology, in institutions, and in intention. India has the infrastructure, the talent, and the ambition. What it needs now is execution—with empathy, speed, and clarity.
As the world rewrites the rules of money, India is not just at the table; with the digital rupee, it’s actively drafting the first lines.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the publication.